Ferguson Plc (LON:FERG) shares rose Monday on news that tax changes in the US should bode well for the group’s bottom line, prompting one analyst to lift the group’s price target and earnings estimates.
The distributor of plumbing and heating products said it expects an effective US tax rate of 25% for the current year ending July 31, down from previous guidance of 28%, with the recent enactment of the Tax Cuts and Jobs Act in December.
That comes as especially good news for the FTSE 100-listed company, which in December reported strong organic growth in the US that boosted first-quarter trading revenue and profit.
READ: Ferguson sees strong US organic growth lift first-quarter trading profit and revenue
On an ongoing basis, the company – formerly known as Wolseley – said it expects its effective US tax rate to be in the range of 21% to 22%.
The company added that it doesn’t expect any material one-off charges or credits as a result of the tax change.
Analyst remains bullish
The news prompted Liberum to raise its price target to 5,800p and upgrade estimates for earning per share (EPS) by 4% for 2018 and 10% in 2019 and beyond.
Liberum has a “buy” rating on the shares.
“The story is still about more than the US tax charge: improving margin momentum, market share gains and a strong construction outlook,” the analysts wrote in a note Monday.
The stock rose nearly 2% in morning trading to 5,588p.
-- Adds analyst comments, updates share price –